Monopsony and its drawbacks

The Bully Fire, which has burned more than 12,600 acres in Shasta County, is nearly contained. In the two weeks since it ignited, about 2,000 firefighters have battled the blaze. Nearly half of them — 900 — are inmates with the California Department of Corrections. These “low-level offenders” making just $2 a day are a crucial component in how the state battles wildfires.

Yet there is some extra compensation:

Once they’re in the program they never spend a night in a prison facility.

Nonetheless:

A few other men say they might try firefighting when they’re released, but most, citing the hot, hard work and long hours, say, “No way.”

A reduced sentence means more time to work once they get out so they are earning more in reduced opportunity cost than that explicit wage.

andrew'August 3, 2014 at 6:37 am

Putting them in stressful situations to see how they react might be useful.

JayAugust 3, 2014 at 8:19 am

These poor humans are SLAVES like WalMart employees!

The Other JimAugust 3, 2014 at 2:03 pm

Right, child. It’s exactly like WalMart.

SamAugust 3, 2014 at 8:31 am

While this particular case seems to benefit everyone involved, there are very perverse incentives if the state can use its prisoners to perform arbitrary work for under market rate.

andrew'August 3, 2014 at 8:33 am

What Walter Block said!

Oskar SigvardssonAugust 3, 2014 at 9:03 am

I agree. It bothered me that the article stated that there are no hard numbers on recidivism rates, which should surely be a bigger concern than money saved.

On the other hand, if these kinds of programs are entirely voluntary, the prisoners can always decline to participate. You just have to make sure that they really are voluntary, as opposed to “voluntary”.

BCAugust 3, 2014 at 9:20 am

I’m not so sure. The state already has taxing power, i.e., the state can already force non-firefighters to work for after-tax below market pay and use those taxes to pay firefighters at the market rate. (Or, depending on the economic incidence, the state can force employers of non-firefighters to pay pre-tax above market wages and use those taxes to pay firefighters at the market rate.) Labor is fungible because the money used to pay for labor is fungible.

Now, there are political constraints that can limit taxes: (most) voters don’t like tax hikes, especially if their own taxes are hiked. Presumably, most voters also don’t like innocent people to be imprisoned or even guilty people to receive sentences that are disproportionate to their crimes, especially if those crimes are acts that those voters are likely to commit themselves. That state cannot force people to commit crimes, so it would seem that the state is much more likely to obtain labor through taxation rather than imprisonment.

Andrew'August 3, 2014 at 9:36 am

By monopolizing fire districts, and the observation that a lot of firefighters are volunteer, maybe they do it to firefighters as well.

mulpAugust 3, 2014 at 5:34 pm

Fire fighting is not monopolized. You will find that in the really wealthy neighborhoods, the insurers will hire private fire fighters to protect their insured properties.

Granted they will probably not do anything to stop millions of dollars in property losses on public land, eg, loss of trees with timber value, or flood and erosion control, but that’s the way markets work, work is done for other those paying for it. And they probably won’t spend a $100,000 to stop a fire on public land which a day later causes them to spend a $1,000,000 defending their client insurer’s property – unless the insurer calculated the $100,000 paid to protect everyone was actuarially profitable to the insurers.

ThomasAugust 3, 2014 at 8:32 pm

If only the private market were as efficient as the government, right Mulp?

cowboydroidAugust 4, 2014 at 9:51 am

Ah, the Tragedy of the Commons, restated so eloquently!

ThomasAugust 3, 2014 at 3:43 pm

“The state cannot force people to commit crimes”

It seems that the Byzantine Federal Code would suggest otherwsie.

A Definite Beta GuyAugust 3, 2014 at 8:36 am

Wait. Doesn’t this suggest that maybe it was was kind of stupid to lock them up in the first place?

andrew'August 3, 2014 at 8:43 am

Yes, and we should embrace our stupidity. The ideal system would use high probability offenders as guinea pigs to separate the lowest probability sub population. Then there is victim compensation, of which supporting the deterrence system is paying it forward. As this is about as close as we can hope to a public good provision I kind of like it. We need the full description and accounting.

BCAugust 3, 2014 at 9:30 am

Only if one doesn’t consider the people that were not victimized by crimes that were deterred.

F. Lynx PardinusAugust 3, 2014 at 9:46 am

Paging Tom Cruise, there are pre-crimes to be solved!

BCAugust 3, 2014 at 10:54 am

Ha. Just to clarify, I was referring to people that are not currently in prison that were deterred from committing crimes because they know that people that do commit crimes end up in prison. I was not implying that if these firefighting inmates were released that they would necessarily commit additional crimes or that they need to be kept in prison to prevent pre-crimes.

cowboydroidAugust 4, 2014 at 9:54 am

Only cowards perceive fear as an effective motivator.

MichaelAugust 3, 2014 at 9:53 am

Um…this has nothing to do with monopsony.

Justin MillarAugust 3, 2014 at 11:02 am

Hi Michael. This actually is a monopsony, because there is only one potential buyer for prison labor (government).

MichaelAugust 3, 2014 at 1:07 pm

I wouldn’t call prison labor a market.

Rick HullAugust 3, 2014 at 3:36 pm

What makes you say it’s not a market, aside from the glaring monopsony?

mulpAugust 3, 2014 at 5:43 pm

“This actually is a monopsony, because there is only one potential buyer for prison labor (government).”

The private sector has long hired prison labor. In the South, the arresting of “vagrants” – mostly black – was highly profitable to everyone except blacks, and white trash from outside the South, until circa WWII.

Even today, prisoners are hired in large numbers as telemarketers. They can’t be trusted to have personal data so the bill collector calls etc are outsourced to India, etc, but making the cold call to raise 10 cents on the dollar for your fire/police department charity is aok with a private for profit taking 40 cents in profits.

ThomasAugust 3, 2014 at 8:34 pm

Considering that government must act as the clearing house for buyers and sellers of prison labor, it is both a monopsony and a monopoly. Thank you for pointing out that only through the acts of government are these slave-like conditions made possible.

andrew'August 3, 2014 at 11:35 am

Monopsony didn’t do it. She wasn’t even there.

chuck martelAugust 3, 2014 at 10:51 am

Fighting what are now called “wild fires” doesn’t make any sense whether professional firefighters are used, with the help of flying retardant tankers, or convicts. These fires are a fact of nature and took place before man even existed. Eliminating them creates more problems. Maybe the next step will be to control hurricanes and other serious wind storms, then put plugs in erupting volcanoes and later erect submarine fences to squelch tidal waves.

Mark ThorsonAugust 3, 2014 at 12:15 pm

You should support my proposal to mitigate earthquake damage by installing massive concrete piers on either side of at-risk fault lines and connecting them with giant shock absorbers. We can do this!

The Other JimAugust 3, 2014 at 2:07 pm

At first, I was stunned that the firefighter’s union would allow this to go on. But then I realized it was very hard work. Much better to outsource that.

Inmates could never be used to mow lawns or paint buildings or replace light bulbs. But lugging equipment uphill in 115 degrees in the middle of a fire? Yeah, I think the pinky-ring crowd can look the other way on that.

AtlasUnchainedAugust 3, 2014 at 10:03 pm

The monopsony here seems to be everyone, considering that no one is exempt from taxes, and will pay regardless of whether there was a specific fire or not.

Technically it’s a monopsony, but it’s hard to take it too seriously when they are all forced into the same package of buyers….

What I’m trying to say is the “public” is extremely vague when describing a monopsony.

Also, what is the problem? That the prison employed firemen are not doing an adequate job? Wouldn’t the scrutiny then be on the suppliers of the “public good” rather than the buyers who are forced to purchase the good regardless of effectiveness?

AxaAugust 4, 2014 at 6:20 am

Not everyone has the strength and endurance to be a firefighter. I’m actually surprised they found 900 guys. Are guys in jail better suited for firefighting than the average population?

cowboydroidAugust 4, 2014 at 9:59 am

You kind of missed the point. The fact that there is a monopsonist buyer of these men’s labor has a perverse effect on their incentive to act. Were they competing for market-rate wages, many of them would likely have nothing to do with firefighting. Their calculation of their own strength and endurance to be a professional firefighter is entirely different from a free man’s.

John MansfieldAugust 4, 2014 at 3:10 pm

One of Norman Maclean’s River Runs Through It stories has wobblies fighting wildfire. The forest service people have to keep an eye out that the wobblies don’t do things like roll burning logs onto unburnt areas to keep the work going longer.